Exhibit 99.2
HEALTHCARE REIT
2Q11 SUPPLEMENTAL INFORMATION
TABLE OF CONTENTS
CORPORATE Corporate Profile | 2 Analyst Coverage | 3
Investor Relations Contacts | 3 Executive Officers | 4
Forward-Looking Statements and Risk Factors | 5 Additional Information | 5
FINANCIAL Consolidated Balance Sheets (Unaudited) | 6
Consolidated Statements of Income (Unaudited) | 7
Funds from Operations Reconciliation | 8
Funds Available for Distribution Reconciliation | 9
Adjusted EBITDA Reconciliation | 10
Net Operating Income Reconciliation | 11
Outlook Reconciliation | 12
Normalizing Items | 13
Revenue and Lease Maturity | 13
Debt Maturities and Principal Payments | 14
Fixed and Floating Rate Debt | 14
Current Capitalization | 15
INVESTMENT Gross Investment Activity—Quarter | 16
Gross Investment Activity—Year | 17
Investment Timing | 18
Disposition Activity | 18
Discontinued Operations | 18
PORTFOLIO Portfolio Composition | 19
Investment Metrics | 19
Portfolio Concentration | 20
Top Ten Customer Descriptions | 21
MSA and Region Concentration | 22
Portfolio Performance | 23
Entrance Fee Portfolio | 23
Same Store Cash NOI Growth | 23
Portfolio Composition – Senior Housing Operating | 24
Portfolio Performance – Senior Housing | 25
Portfolio Performance – Skilled Nursing | 26
Portfolio Performance – Hospitals | 27
Portfolio Composition – Medical Office Buildings | 28
Portfolio Performance – Medical Office Buildings | 28
Portfolio Concentration – Medical Office Buildings | 29
Portfolio Composition – Life Science Buildings | 30
Development Activity | 31
Development Funding Projections | 31
Development Project Conversion Estimates | 31
Unstabilized Properties | 32
Portfolio Trends | 33
GLOSSARY Glossary | 34
Supplemental Reporting Measures | 37
CORPORATE
2
HEALTH CARE REIT, INC., is a real estate investment trust that has been at the forefront of senior living and health care real estate since its founding in 1970. An S&P 500 company with an enterprise value of $17.1 billion, Health Care REIT’s portfolio spans the full spectrum of health care, including senior living communities, post-acute care facilities, medical office buildings, inpatient and outpatient medical centers and life science facilities. Health Care REIT’s capital programs, combined with its comprehensive planning, development and property management services, make it a single-source solution for its partners.
Data as of: June 30, 2011
NYSE Symbol: HCN Enterprise Value (1): $17.1 billion Investment Concentration*
Closing Price: $52.43 Gross Real Estate Assets (1): $13.8 billion Top 5 Customers (1) 41%
52 Week Hi/Lo: $54.98/$41.28 Debt to Market Capitalization: 38% Top 5 States (1) 39%
Dividend/Yield: $2.86/5.45% Debt to Book Capitalization: 49%* % of total investments
Shares Outstanding: 177 million
PROVEN INVESTMENT STRATEGY: RELATIONSHIPS, RESULTS, RETURNS
RELATIONSHIPS
Premier senior housing operators and health care systems choose to develop long-term business partnerships with Health Care REIT because the company is a trusted capital partner with unique and sophisticated structures that meet the operators’ capital and operational needs. A partnership with Health Care REIT provides operators with capital to grow profitably while providing quality care to patients and residents.
RESULTS
Health Care REIT’s actively managed and diversified portfolio includes over 100 high-quality organizations. Each new partnership creates the opportunity for growth through future off-market transactions. Over $7.3 billion has been invested in 2010 and 2011 to-date. The company’s new $2.0 billion line of credit ensures certainty of execution for its partners and enhanced flexibility in funding new investments.
GROSS INVESTMENTS $ millions
$1,189 $1,234 $717 $3,151 $4,287 SH-NNN SH-Ops MFG
CIP
Other
2007 2008 2009 2010 2011 (2)
Notes:
(1) Includes joint venture investments.
(2) Includes all gross investments announced to-date.
18% 6% 3% 28%
Investment
Balances
17% 28%
Senior Housing NNN Senior Housing Operating Hospital
Skilled Nursing/Post-Acute Medical Office Building Life Science
RETURNS
Health Care REIT is focused on creating stockholder value. Since inception, the company has generated total annual returns of 16% and declared 161 consecutive quarterly dividends. The company maintains a commitment to investment growth, conservative balance sheet management and active asset and property management.
ANNUAL RETURNS SINCE INCEPTION*
35% 30% 25% 20% 15% 10% 5% 0%
1 year 5 years 10 years 20 years Since inception
* assumes reinvestment of dividends; data as of June 30, 2011
SOLID DIVIDEND PAYMENT RECORD*
$3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00
71 74 77 80 83 86 89 92 95 98 01 04 07 10
$2.86
*adjusted for stock splits
ANALYST COVERAGE
Robert W. Baird & Co. Bank of America Merrill Lynch BMO Capital Markets Corp. Cowen and Company Deutsche Bank
Securities Inc. Edward Jones Goldman Sachs & Co.
Green Street Advisors, Inc. J.J.B. Hilliard, W.L. Lyons, LLC Jefferies & Company, Inc. J.P. Morgan Securities Inc. KeyBanc Capital Markets Inc. Morgan Keegan & Co., Inc. Raymond James & Associates, Inc. Sandler O-Neill + Partners, L.P. Stifel Nicolaus & Company, Inc. UBS Securities LLC.
Wells Fargo Securities, LLC
INVESTOR RELATIONS
ANALYST / INVESTOR CONTACT Scott A. Estes EVP & CFO sestes@hcreit.com
Michael A. Crabtree SVP & Treasurer mcrabtree@hcreit.com
Jay P. Morgan SVP Finance jmorgan@hcreit.com
GENERAL INQUIRIES Jennifer C. Steiner VP-Communications info@hcreit.com
CORPORATE
3
CORPORATE
4
George L. Chapman
Chairman, Chief Executive Officer & President
Mr. Chapman is Chairman, Chief Executive Officer and President of the company. Mr. Chapman served as Chairman and Chief Executive Officer of the company from October 1996 to January 2009. He assumed the additional title of President of the company in January 2009. Mr. Chapman previously served as President of the company from September 1995 to May 2002. From January 1992 to September 1995, he served as Executive Vice President and General Counsel of the company.
Scott A. Estes
EVP & Chief Financial Officer
Mr. Estes is currently Executive Vice President and Chief Financial Officer. He served as Senior Vice President and Chief Financial Officer of the company since March 2006 and served as Vice President of Finance of the company from April 2003 to March 2006. From January 2000 to April 2003, Mr. Estes served as a Senior Equity Analyst and Vice President with Deutsche Bank Securities. From January 1998 to December 1999, Mr. Estes served as a Senior Equity Analyst and Vice President with Bank of America Securities.
Charles J. Herman, Jr.
EVP & Chief Investment Officer
Mr. Herman has served as Executive Vice President and Chief Investment Officer of the company since March 2006. Mr. Herman served as Vice President and Chief Investment Officer of the company from May 2004 to March 2006 and served as Vice President of Operations from August 2000 to May 2004. From 1998 to August 2000, Mr. Herman was a founding member and President of Herman/Turner Group, LLC, a health care consulting company. Prior to that, Mr. Herman was a founder and Chief Operating Officer of Capital Valuation Group, a health care consulting firm founded in 1991.
Jeffrey H. Miller
EVP – Operations & General Counsel
Mr. Miller has served as Executive Vice President and General Counsel of the company since March 2006 and assumed the additional title of Executive Vice President-Operations in January 2009. He served as Vice President and General Counsel of the company from July 2004 to March 2006. From 1996 to June 2004, Mr. Miller was a partner in the real estate practice group of the law firm of Shumaker, Loop & Kendrick, LLP.
John T. Thomas
EVP – Medical Facilities
Mr. Thomas has served as Executive Vice President-Medical Facilities since January 2009. He served as President and Chief Development Officer of Cirrus Health from July 2005 to January 2009. Mr. Thomas served as Senior Vice President/General Counsel for Baylor Health Care System from October 2000 to July 2005 and as General Counsel/Secretary for the St. Louis division of the Sisters of Mercy Health System from April 1997 to October 2000.
Forward-Looking Statements and Risk Factors
This document may contain “forward-looking” statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements concern and are based upon, among other things, the possible expansion of the company’s portfolio; the sale of properties; the performance of its operators/tenants and properties; its ability to enter into agreements with viable new tenants for vacant space or for properties that the company takes back from financially troubled tenants, if any; its occupancy rates; its ability to acquire, develop and/or manage properties; its ability to make distributions to stockholders; its policies and plans regarding investments, financings and other matters; its tax status as a real estate investment trust; its critical accounting policies; its ability to appropriately balance the use of debt and equity; its ability to access capital markets or other sources of funds; and its ability to meet its earnings guidance. When the company uses words such as “may,” “will,” “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “estimate” or similar expressions, it is making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. The company’s expected results may not be achieved, and actual results may differ materially from expectations. This may be a result of various factors, including, but not limited to: the status of the economy; the status of capital markets, including availability and cost of capital; issues facing the health care industry, including compliance with, and changes to, regulations and payment policies, responding to government investigations and punitive settlements and operators’/tenants’ difficulty in cost-effectively obtaining and maintaining adequate liability and other insurance; changes in financing terms; competition within the health care, senior housing and life sciences industries; negative developments in the operating results or financial condition of operators/tenants, including, but not limited to, their ability to pay rent and repay loans; the company’s ability to transition or sell facilities with profitable results; the failure to make new investments as and when anticipated; acts of God affecting the company’s properties; the company’s ability to re-lease space at similar rates as vacancies occur; the company’s ability to timely reinvest sale proceeds at similar rates to assets sold; operator/tenant or joint venture partner bankruptcies or insolvencies; the cooperation of joint venture partners; government regulations 4 affecting Medicare and Medicaid reimbursement rates and operational requirements; regulatory approval and market acceptance of the products and technologies of life sciences tenants; liability or contract claims by or against operators/tenants; unanticipated difficulties and/or expenditures relating to future acquisitions; environmental laws affecting the company’s properties; changes in rules or practices governing the company’s financial reporting; and legal and operational matters, including real estate investment trust qualification and key management personnel recruitment and retention. Finally, the company assumes no obligation to update or revise any forward-looking statements or to update the reasons why actual results could differ from those projected in any forward-looking statements.
Additional Information
The information in this supplemental information package should be read in conjunction with the company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, earnings press release dated August 4, 2011 and other information filed with, or furnished to, the Securities and Exchange Commission (“SEC”). The Supplemental Reporting Measures and reconciliations of Non-GAAP measures are an integral part of the information presented herein.
You can access the company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act at http://www.hcreit.com as soon as reasonably practicable after they are filed with, or furnished to, the SEC. The information on or connected to the company’s website is not, and shall not be deemed to be, a part of, or
incorporated into this supplemental information package. You can also review these SEC filings and other information by accessing the SEC’s website at http://www.sec.gov.
CORPORATE
5
FINANCIAL
6
Consolidated Balance Sheets (unaudited)
(dollars in thousands)
June 30,
2011 2010
Assets
Real estate investments:
Real property owned
Land and land improvements $ 983,746 $ 571,501
Buildings and improvements 11,497,863 5,854,675
Acquired lease intangibles 347,662 147,861
Real property held for sale, net of accumulated depreciation 18,202 13,020
Construction in progress 212,161 255,883
Gross real property owned 13,059,634 6,842,940
Less accumulated depreciation and amortization (968,289) (766,630)
Net real property owned 12,091,345 6,076,310
Real estate loans receivable (1) 326,651 471,805
Less allowance for losses on loans receivable (1,692) (5,025)
Net real estate loans receivable 324,959 466,780
Net real estate investments 12,416,304 6,543,090
Other assets:
Equity investments 250,933 181,527
Goodwill 51,207
Deferred loan expenses 48,808 31,568
Cash and cash equivalents 328,758 55,423
Restricted cash 42,497 59,656
Receivables and other assets (2) 342,154 208,067
Total other assets 1,064,357 536,241
Total assets $ 13,480,661 $ 7,079,331
Liabilities and equity
Liabilities:
Borrowings under unsecured lines of credit arrangements $— $ 206,000
Senior unsecured notes 4,429,992 2,135,422
Secured debt 1,889,873 813,341
Capital lease obligations 83,794
Accrued expenses and other liabilities 325,550 187,443
Total liabilities 6,729,209 3,342,206
Redeemable noncontrolling interests 18,410
Equity:
Preferred stock 1,010,417 286,410
Common stock 177,290 124,520
Capital in excess of par value 6,314,692 3,937,485
Treasury stock 13,493) (11,315)
Cumulative net income 1,795,448 1,630,120
Cumulative dividends (2,682,479) (2,237,720)
Accumulated other comprehensive income (10,145) (8,526)
Other equity 6,460 5,755
Total Health Care REIT, Inc. stockholders’ equity 6,598,190 3,726,729
Noncontrolling interests 134,852 10,396
Total equity 6,733,042 3,737,125
Total liabilities and equity $ 13,480,661 $ 7,079,331
Notes:
(1) Includes non-accrual loan balances of $9,287,000 and $78,438,000 at June 30, 2011 and 2010, respectively.
(2) Includes net straight-line receivable balances of $97,769,000 and $84,361,000 at June 30, 2011 and 2010, respectively.
Consolidated Statements of Income (unaudited)
(amounts in thousands except per share data)
FINANCIAL
7
Three Months Ended Six months ended
June 30, June 30,
2011 2010 2011 2010
Revenues:
Rental income $ 239,703 $ 141,764 $ 406,848 $ 274,761
Resident fees and service 123,149—194,435
Interest income 12,866 9,335 24,575 18,383
Other income 5,341 2,650 8,165 3,646
Total revenues 381,059 153,749 634,023 296,790
Expenses:
Interest expense 83,961 35,478 142,347 63,403
Property operating expenses 100,197 11,970 164,126 23,761
Depreciation and amortization 110,382 44,037 183,186 84,042
General and administrative expenses 19,562 11,878 37,276 28,700
Transaction costs 13,738 752 49,803 8,466
Loss (gain) on extinguishment of debt—7,035—25,072
Provision for loan losses 168—416
Total expenses 328,008 111,150 577,154 233,444
Income from continuing operations before
income taxes and income from unconsolidated
joint ventures 53,051 42,599 56,869 63,346
Income tax expense (211) (188) (340) (273)
Income from unconsolidated joint ventures 971 1,828 2,514 2,596
Income from continuing operations 53,811 44,239 59,043 65,669
Discontinued operations:
Gain (loss) on sales of properties 30,224 3,314 56,380 10,033
Impairment of assets — (202)
Income (loss) from discontinued operations, net 2,173 3,511 2,797 7,056
Discontinued operations, net 32,397 6,825 58,975 17,089
Net income 86,208 51,064 118,018 82,758
Less: Preferred stock dividends 17,353 5,484 26,033 10,993
Net income (loss) attributable to
noncontrolling interests (992) (66) (1,234) 307
Net income attributable to common stockholders $ 69,847 $ 45,646 $ 93,219 $ 71,458
Average number of common shares outstanding:
Basic 176,445 123,808 165,755 123,541
Diluted 177,487 124,324 166,458 124,059
Net income attributable to common stockholders
per share:
Basic $ 0.40 $ 0.37 $ 0.56 $ 0.58
Diluted $ 0.39 $ 0.37 $ 0.56 $ 0.58
Common dividends per share $ 0.715 $ 0.68 $ 1.405 $ 1.36
FINANCIAL
8
Funds From Operations Reconciliation *
(amounts in thousands except per share data)
Three Months Ended Six months ended
June 30, June 30,
2011 2010 2011 2010
Net income attributable to common stockholders $ 69,847 $ 45,646 $ 93,219 $ 71,458
Depreciation and amortization (1) 111,053 47,451 185,821 91,032
Loss (gain) 3 on sales of properties (30,224) (3,314) (56,380) (10,033)
Noncontrolling interests (2) (4,487) 108 (8,647) (255)
Unconsolidated joint ventures (3) 3,364 2,323 6,391 3,098
Funds from operations 149,553 92,214 220,404 155,300
Normalizing items, net (4) 10,396 6,937 47,740 36,269
Funds from operations — normalized $ 159,949 $ 99,151 $ 268,144 $ 191,569
Average diluted common shares outstanding 177,487 124,324 166,458 124,059
Per diluted share data:
Net income attributable to common stockholders $ 0.39 $ 0.37 $ 0.56 $ 0.58
Funds from operations $ 0.84 $ 0.74 $ 1.32 $ 1.25
Funds from operations — normalized $ 0.90 $ 0.80 $ 1.61 $ 1.54
Normalized FFO Payout Ratio
Dividends per share $ 0.715 $ 0.68 $ 1.405 $ 1.36
FFO per diluted share — normalized $ 0.90 $ 0.80 $ 1.61 $ 1.54
Normalized FFO payout ratio 79% 85% 87% 88%
Notes:
* Please see discussion of Supplemental Reporting Measures on page 37.
(1) Depreciation and amortization includes depreciation and amortization from discontinued operations.
(2) Represents noncontrolling interests’ share of transaction costs and depreciation and amortization.
(3) Represents HCN’s share of unconsolidated joint ventures’ depreciation and amortization.
(4) See page 13 for schedule of normalizing items.
Funds Available for Distribution Reconciliation *
(amounts in thousands except per share data)
Three Months Ended Six months ended
June 30, June 30,
2011 2010 2011 2010
Net income attributable to common stockholders $ 69,847 $ 45,646 $ 93,219 $ 71,458
Depreciation and amortization (1) 111,053 47,451 185,821 91,032
Loss (gain) 3 on sales of properties (30,224) (3,314) (56,380) (10,033)
Noncontrolling interests (2) (3,975) 50 (7,812) (290)
Unconsolidated joint ventures (3) 1,653 915 2,845 1,214
Gross straight-line rental income (10,988) (4,145) (16,018) (8,598)
Prepaid/straight-line rent receipts 3,102 2,330 6,713 4,068
Amortization related to above/(below) market leases, net (398) (809) (1,056) (1,296)
Non-cash interest expense 2,698 3,659 6,415 6,500
Cap-ex, tenant improvements, lease commissions (8,924) (5,060) (17,065) (8,831)
Funds available for distribution 133,844 86,723 196,682 145,224
Normalizing items, net (4) 10,396 6,937 47,740 36,269
Prepaid/straight-line rent receipts (3,102) (2,330) (6,713) (4,068)
Funds available for distribution — normalized $ 141,138 $ 91,330 $ 237,709 $ 177,425
Average diluted common shares outstanding 177,487 124,324 166,458 124,059
Per diluted share data:
Net income attributable to common stockholders $ 0.39 $ 0.37 $ 0.56 $ 0.58
Funds available for distribution $ 0.75 $ 0.70 $ 1.18 $ 1.17
Funds available for distribution — normalized $ 0.80 $ 0.73 $ 1.43 $ 1.43
Normalized FAD Payout Ratio
Dividends per share $ 0.715 $ 0.68 $ 1.405 $ 1.36
FAD per diluted share — normalized $ 0.80 $ 0.73 $ 1.43 $ 1.43
Normalized FAD payout ratio 89% 93% 98% 95%
Notes:
* Please see discussion of Supplemental Reporting Measures on page 37.
(1) Depreciation and amortization includes depreciation and amortization from discontinued operations.
(2) Represents noncontrolling interests’ share of transaction costs, depreciation and amortization, gross straight-line rental income,
amortization of above/below market leases and non-cash interest expense.
(3) Represents HCN’s share of unconsolidated joint ventures’ depreciation and amortization, gross straight-line rental income,
amortization of above/below market leases and non-cash interest expense.
(4) See page 13 for schedule of normalizing items.
FINANCIAL
9
FINANCIAL
10
Adjusted EBITDA Reconciliation *
(dollars in thousands)
Twelve Months Ended Three Months Ended
June 30, June 30,
2011 2011
Net income $ 164,146 $ 86,209
Interest expense (3) 237,528 84,773
Income tax expense 430 211
Depreciation and amortization (3) 297,333 111,053
Stock-based compensation 10,350 1,681
Provision for loan losses 30,100 168
Loss (gain) on extinguishment of debt 9,099
Adjusted EBITDA $ 748,986 $ 284,095
Interest Coverage Ratio
Interest expense (3) $ 237,528 $ 84,773
Capitalized interest 15,418 2,313
Non-cash interest expense (13,859) (2,698)
Total interest $ 239,087 $ 84,388
Adjusted EBITDA $ 748,986 $ 284,095
Adjusted interest coverage ratio 3.13x (1) 3.37x
Fixed Charge Coverage Ratio
Total interest (3) $ 239,087 $ 84,388
Secured debt principal amortization 21,866 7,011
Preferred dividends 36,685 17,353
Total fixed charges $ 297,638 $ 108,752
Adjusted EBITDA $ 748,986 $ 284,095
Adjusted fixed charge coverage ratio 2.52x (2) 2.61x
Net Debt to EBITDA Ratio
Total debt $ 6,403,659
Less: cash and cash equivalents (328,758)
Net debt $ 6,074,901
Adjusted EBITDA Annualized 1,136,380
Net debt to adjusted EBITDA ratio 5.35x
Notes:
* Please see discussion of Supplemental Reporting Measures on page 37.
(1) A comparable covenant in our senior unsecured notes is a minimum of 1.50 times.
(2) Effective July 27, 2011, a comparable covenant in our unsecured line of credit arrangement is a minimum of 1.50 times.
(3) Interest expense and depreciation and amortization include discontinued operations.
Net Operating Income Reconciliation *
(dollars in thousands)
Three Months Ended Six months ended
June 30, June 30,
2011 2010 2011 2010
Total revenues:
Senior housing triple-net:
Senior housing $ 76,128 $ 56,197 $ 144,781 $ 108,561
Skilled nursing 93,119 41,057 130,207 81,929
Sub-total rental income 169,247 97,254 274,988 190,490
Interest income 11,036 8,830 20,414 17,405
Other income 4,497 1,536 5,004 2,028
Total senior housing triple-net income 184,780 107,620 300,406 209,923
Senior housing operating: Resident fees and services 123,149 — 194,435
Medical facilities:
Rental income (2):
Medical office(1) 58,560 42,056 113,329 82,145
Hospitals 17,561 12,484 30,228 23,265
Life sciences (1) 10,584 9,355 21,854 13,080
Sub-total rental income 86,705 63,895 165,411 118,490
Interest income 1,830 505 4,161 978
Other income 466 302 2,251 574
Total medical facilities income 89,001 64,702 171,823 120,042
Non-segment/corporate other income 378 812 910 1,044
Total revenues 397,308 173,134 667,574 331,009
Property operating expenses:
Senior housing triple-net — —
Senior housing operating 84,334 — 133,606
Medical facilities (1,2) 20,185 15,719 40,094 30,539
Non-segment/corporate — —
Total property operating expenses 104,519 15,719 173,700 30,539
Net operating income:
Senior housing triple-net 184,780 107,620 300,406 209,923
Senior housing operating 38,815 — 60,829
Medical facilities 68,816 48,983 131,729 89,503
Non-segment/corporate 378 812 910 1,044
Net operating income $ 292,789 $ 157,415 $ 493,874 $ 300,470
Notes:
* Please see discussion of Supplemental Reporting Measures on page 37.
(1) Includes HCN’s share of revenues and expenses from unconsolidated joint ventures. See pages 28 and 30 for additional
information.
(2) The three months ended June 30, 2011 includes the following amounts (in thousands):
Rental income from discontinued operations:
Senior housing $ 1,236
Skilled nursing 2,200
Medical office 1,050
Total $ 4,486
Non-cash rental income from continuing operations:
Senior housing $ 2,846
Skilled nursing 5,887
Hospitals 220
Medical office 2,433
Life sciences (1) 1,155
Total $ 12,541
Property operating expenses from discontinued operations:
Medical office $ 566
Hospitals $ 264
Total $ 830
FINANCIAL
11
FINANCIAL
12
Outlook Reconciliation: Year ended December 31, 2011
(amounts represent per share data)
Low High
FFO Reconciliation*
Net income attributable to common stockholders $ 1.04 $ 1.10
Loss (gain) 3 on sales of properties (0.33) (0.33)
Depreciation and amortization (1) 2.35 2.35
Funds from operations $ 3.06 $ 3.12
Normalizing items, net (2) 0.28 0.28
Funds from operations — normalized $ 3.34 $ 3.40
FAD Reconciliation*
Net income attributable to common stockholders $ 1.04 $ 1.10
Loss (gain) 3 on sales of properties (0.33) (0.33)
Depreciation and amortization (1) 2.35 2.35
Net straight-line rent and above/below amortization (10.19) (0.19)
Non-cash interest expense 0.09 0.09
Cap-ex, tenant improvements, lease commissions (0.18) (0.18)
Funds available for distribution $ 2.78 $ 2.84
Normalizing items, net (2) 0.28 0.28
Prepaid/straight-line rent receipts (0.04) (0.04)
Funds available for distribution — normalized $ 3.02 $ 3.08
Notes:
* Please see discussion of Supplemental Reporting Measures on page 37.
(1) Amounts presented net of noncontrolling interests’ share and HCN’s share of unconsolidated joint ventures.
(2) See page 13 for schedule of normalizing items.
Normalizing Items *
(amounts in thousands except per share data)
Three Months Ended Six months ended
June 30, June 30,
2011 2010 2011 2010
Impairment of assets $—$—$ 202 $
Transaction costs 13,738 752 49,803 8,466
Special stock compensation grants/payments — — 2,853
Loss (gain) on extinguishment of debt — 7,035 — 25,072
Provision for loan losses 168 — 416
Held for sale hospital operating expenses 264 150 1,093 878
Non-recurring other income (3,774) (1,000) (3,774) (1,000)
Total $ 10,396 $ 6,937 $ 47,740 $ 36,269
Average diluted shares outstanding 177,487 124,324 166,458 124,059
Net amount per diluted share $ 0.06 $ 0.06 $ 0.29 $ 0.29
Revenue and Lease Maturity
(amounts in thousands except per share data)
Rental Income (1)
Senior Skilled Medical Total Rental Interest Total% of
Year Housing Nursing Hospitals Office Income Income (2) Revenues Total
2011 $ 2,243 $— $— $ 4,036 $ 6,279 $ 1,092 $ 7,371 0.8%
2012 5,549 6,887 — 13,793 26,229 1,505 27,734 2.9%
2013 44,499 — 10,565 55,064 12,118 67,182 7.1%
2014 — 6,400 — 12,064 18,464 5,469 23,933 2.5%
2015 — 2,014 — 11,276 13,290 1,237 14,527 1.5%
2016 — — 15,197 15,197 447 15,644 1.7%
2017 12,720 3,885 2,350 11,216 30,171 3,147 33,318 3.5%
2018 36,751 — 5,138 41,889 1,397 43,286 4.6%
2019 9,463 18,465 — 10,631 38,559 160 38,719 4.1%
2020 12,918 27,556 5,954 9,987 56,415 1,459 57,874 6.1%
Thereafter 177,191 289,109 62,641 72,659 601,600 11,307 612,907 65.2%
$ 301,334 $ 354,316 $ 70,945 $ 176,562 $ 903,157 $ 39,338 $ 942,495 100.0%
Notes:
* Please see discussion of Supplemental Reporting Measures on page 37.
(1) Rental income represents annualized base rent for effective lease agreements. The amounts are derived from the current contracted
monthly base rent including straight-line for leases with fixed escalators or annual cash rent for leases with contingent escalators,
net of collectability reserves, if applicable. Rental income does not include common area maintenance charges or the amortization
of above/below market lease intangibles.
(2) Reflects contract rate of interest for loans, net of collectability reserves if applicable.
FINANCIAL
13
FINANCIAL
14
Debt Maturities and Principal Payments
(dollars in thousands)
Line of Senior Notes Secured Debt Consolidated Joint Combined % of
Year Credit (1)(2,3)(2,4) Debt (5) % of Total Ventures (6) Debt Total
2011 $— $— $ 14,545 $ 14,545 0.2% $ 2,349 $ 16,894 0.3%
2012 — 76,853 101,796 178,649 2.8% 39,757 218,406 3.3%
2013 — 300,000 274,860 574,860 9.1% 28,967 603,827 9.3%
2014 — 186,539 186,539 2.9% 25,058 211,597 3.2%
2015 — 250,000 181,087 431,087 6.8% 9,207 440,294 6.7%
2016 — 700,000 172,558 872,558 13.8% 45,370 917,928 14.1%
2017 — 450,000 427,825 877,825 13.9% 31,654 909,479 13.9%
Thereafter — 2,688,077 509,919 3,197,996 50.5% 10,156 3,208,152 49.2%
Totals $— 4,464,930$ $ 1,869,129 6,334,059$ 100.0% $ 192,518 $6,526,577 100.0%
Weighted Avg
Interest Rate (7) 1.5% 5.1% 5.5% 5.2% 6.1% 5.3%
Weighted Avg
Maturity (3) — 10.8 8.2 10.0 4.5 9.9
Fixed and Floating Rate Debt
(dollars in thousands)
Consolidated % of % of
Debt Consolidated Combined Debt Combined
Fixed Rate Debt
Senior notes $ 4,464,930 70.5% $ 4,464,930 68.4%
Secured debt 1,653,235 26.1% 1,845,753 28.2%
Total fixed $ 6,118,165 96.6% $ 6,310,683 96.6%
Floating Rate Debt
Line of credit $— 0.0% $— 0.0%
Secured debt 215,894 3.5% 215,894 3.3%
Total floating $ 215,894 3.5% $ 215,894 3.3%
Total debt $ 6,334,059 100.0% $ 6,526,577 100.0%
Notes:
(1) Effective July 27, 2011, current line of credit capacity of $2.0 billion with remaining availability of $2.0 billion. Line of credit
currently matures on July 27, 2015.
(2) Amounts above represent principal amounts due and do not include unamortized premiums/discounts or other fair value adjustments
as reflected on the balance sheet.
(3) $126 million of convertible senior notes are puttable on December 1, 2011, $168 million of convertible senior notes are puttable
on July 15, 2012 and $494 million of convertible senior notes are puttable on December 1, 2014. Weighted average maturities
would be 8.1 years and 8.2 years for senior notes and consolidated debt, respectively, using the puttable dates.
(4) Secured debt includes $1,099,137,000 related to HCN’s senior housing operating partnerships.
(5) Excludes capital lease obligations of $8.8 million that mature in April 2015 and $74.0 million that mature in November 2013.
(6) Represents HCN’s share of secured debt of unconsolidated joint ventures.
(7) Line of credit interest rate represents 1-month LIBOR + 135 bps at June 30, 2011. Senior notes and secured debt average interest
rate represents the face value note rate.
Current Capitalization
(amounts in thousands except per share data)
Consolidated% of Total
Book Capitalization
Line of credit $— 0.0%
Long-term debt obligations 6,403,659 48.7%
Debt to consolidated book capitalization (1) 6,403,659 48.7%
Total equity 6,733,042 51.3%
Consolidated book capitalization $ 13,136,701 100.0%
HCN share of unconsolidated joint venture debt 192,518
Total book capitalization $ 13,329,219
Undepreciated Book Capitalization
Line of credit $— 0.0%
Long-term debt obligations 6,403,659 45.4%
Debt to consolidated undepreciated book capitalization 6,403,659 45.4%
Accumulated depreciation and amortization 968,289 6.9%
Total equity 6,733,042 47.7%
Consolidated undepreciated book capitalization $ 14,104,990 100.0%
HCN share of unconsolidated joint venture debt 192,518
Total undepreciated book capitalization $ 14,297,508
Enterprise Value
Line of credit $— 0.0%
Long-term debt obligations 6,403,659 38.0%
Debt to consolidated enterprise value 6,403,659 38.0%
Common shares outstanding 177,328
Period end share price $52.43
Common equity market capitalization 9,297,307 55.1%
Noncontrolling interests 153,262 0.9%
Preferred stock 1,010,417 6.0%
Consolidated enterprise value $ 16,864,645 100.0%
HCN share of unconsolidated joint venture debt 192,518
Total enterprise value $ 17,057,163
Secured Debt as % of Total Assets (2)
Secured debt $ 1,889,873 14.0%
Total assets $ 13,480,661
Total Debt as % of Total Assets (3)
Total debt $ 6,403,659 47.5%
Total assets $ 13,480,661
Unsecured Debt as % of Unencumbered Assets (4)
Unsecured debt $ 4,513,786 43.1%
Unencumbered assets $ 10,468,867
Notes:
(1) A comparable covenant in our unsecured line of credit arrangement is a maximum of 60%.
(2) A comparable covenant in our senior unsecured notes is a maximum of 40%. A comparable covenant in our unsecured line of credit
arrangement is a maximum of 30%.
(3) A comparable covenant in our senior unsecured notes is a maximum of 60%.
(4) A comparable covenant in our unsecured line of credit arrangement is a maximum of 60%. A comparable covenant in our senior
unsecured notes is a maximum of 66.7%.
FINANCIAL
15
INVESTMENT
16
Gross Investment Activity
Second Quarter 2011
Investment Per
Amount Bed / Unit / Initial
Properties ($000) Square Foot Cash Yield
Real Property Acquisitions
Combination — rental 15 2,043 units $ 315,624 $ 154,490 7.8%
Freestanding independent living 1 144 units 14,900 103,472 7.5%
Freestanding assisted living 13 975 units 105,228 107,926 8.0%
Freestanding skilled nursing 129 16,156 beds 2,222,977 137,595 8.3%
Medical office buildings 6 383,335 sf 64,607 169 7.6%
Total acquisitions 164 2,723,336$ 8.2%
Construction in Progress
Development projects:
Combination — rental 10 1,124 units $ 30,878
Freestanding dementia care 1 42 units 2,277
Hospitals 3 202 beds 15,115
Medical office buildings 3 603,021 sf 26,445
Total development projects 17 74,715
Expansion projects:
CCRC — entrance fee 5 75 units 2,762
Combination — entrance fee 6 135 units 5,563
Total expansion projects 11 8,325
Total construction in progress 28 83,040
Capital improvements to existing properties 5,541 8.3%
Loan advances 5,355 5.9%
Gross investments $2,817,272
Gross Investment Activity
Year-to-date 2011
Investment Per
Amount Bed / Unit / Initial
Properties ($000) Square Foot Cash Yield
Real Property Acquisitions
Senior housing operating 46 3,878 units 1,098,400$ $ 283,239 7.1%
Combination — rental 21 2,827 units 417,688 147,750 7.8%
Freestanding independent living 1 144 units 14,900 103,472 7.5%
Freestanding assisted living 13 975 units 105,228 107,926 8.0%
Freestanding dementia care 1 64 units 11,300 176,563 9.0%
Freestanding skilled nursing 129 16,156 beds 2,222,977 137,595 8.3%
Medical office buildings 6 383,335 sf 64,607 169 7.6%
Land parcels 1 6,770
Total acquisitions 218 3,941,870$ 7.9%
Construction in Progress
Development projects:
Combination — rental 10 1,124 units $ 55,685
Freestanding dementia care 1 42 units 4,647
Hospitals 3 202 beds 39,675
Medical office buildings 6 917,261 sf 81,656
Total development projects 20 181,663
Expansion projects:
CCRC — entrance fee 5 75 units 5,063
Combination — entrance fee 6 135 units 10,604
Hospitals 1 31 beds 2,819
Total expansion projects 12 18,486
Total construction in progress 32 200,149
Capital improvements to existing properties 7,230 8.2%
Loan advances 28,467 7.5%
Gross investments 4,177,716$
INVESTMENT
17
INVESTMENT
18
Investment Timing
(dollars in thousands)
Acquisitions/ Joint Initial Cash Loan Initial Cash Construction Initial Cash
Ventures Yield Advances Yield Conversions Yield Dispositions Yield on Sale
April $ 2,625,719 8.2% $ 1,639 6.7% $ 205,560 9.3%
May 70,817 7.9% 1,320 5.8% 14,065 9.9% $ 112,779 9.1%
June 26,800 8.3% 2,396 5.3% 7,694 6.0% 143,952 9.6%
Total $ 2,723,336 8.2% $ 5,355 5.9% $ 227,319 9.2% $ 256,731 9.4%
Disposition Activity
(dollars in thousands)
Second Quarter 2011 Year-to-Date 2011
Amount% of Total Amount% of Total
Dispositions by Investment Type
Real property $ 134,478 52.4% $ 152,370 54.0%
Real estate loans receivable 122,253 47.6% 129,860 46.0%
Total $ 256,731 100.0% $ 282,230 100.0%
Dispositions by Property Type
Combination — rental $ 99,183 38.6% $ 99,183 35.1%
Freestanding assisted living — 0.0% 10,953 3.9%
Freestanding dementia care — 0.0% 6,939 2.5%
Medical office building 35,295 13.7% 35,295 12.5%
Real estate loans receivable 122,253 47.7% 129,860 46.0%
Total $ 256,731 100.0% $ 282,230 100.0%
Discontinued Operations
(dollars in thousands)
Second Quarter Year-to-Date
2011 2010 2011 2010
Revenues
Rental income $ 4,486 $ 10,030 $ 9,403 $ 21,139
Expenses
Interest expense 812 2,072 1,756 4,132
Property operating expenses 830 1,033 2,215 2,961
Depreciation and amortization 671 3,414 2,635 6,990
Income / (loss) from discontinued operations, net $ 2,173 $ 3,511 $ 2,797 $ 7,056
Portfolio Composition
Investment Balance Committed Balance
Properties ($000) (1)% of Total ($000)% of Total
Investment Concentration — By Predominant Service Type
Senior housing triple-net 262 $ 3,581,102 28.0% $ 3,678,470 28.3%
Skilled nursing facilities 303 3,577,149 27.9% 3,584,329 27.5%
Senior housing operating (2) 99 2,207,194 17.2% 2,207,194 16.9%
Hospitals 31 817,632 6.4% 819,898 6.3%
Medical office buldings 166 2,282,355 17.8% 2,394,847 18.4%
Life science buildings (3) 7 342,725 2.7% 342,725 2.6%
Total 868 $ 12,808,157 100.0% $ 13,027,463 100.0%
Investment Concentration — By Facility Type
Senior housing triple-net portfolio
CCRC — entrance fee 5 $ 273,681 2.1% $ 279,514 2.1%
CCRC — rental 9 304,755 2.4% 304,755 2.3%
Combination — entrance fee 8 386,433 3.0% 394,339 3.0%
Combination — rental 143 1,947,571 15.2% 2,028,023 15.6%
Dementia care 22 126,361 1.0% 129,539 1.0%
Freestanding senior housing 69 387,240 3.0% 387,240 3.0%
Land 6 16,510 0.1% 16,510 0.1%
Other loans — 138,551 1.2% 138,551 1.2%
Subtotal senior housing 262 3,581,102 28.0% 3,678,470 28.3%
Combination skilled nursing 34 305,015 2.4% 312,195 2.4%
Freestanding skilled nursing 269 3,161,215 24.7% 3,161,215 24.3%
Other loans — 110,919 0.8% 110,919 0.8%
Subtotal skilled nursing 303 3,577,149 27.9% 3,584,329 27.5%
Senior housing triple-net total 565 7,158,251 55.9% 7,262,799 55.8%
Senior housing operating (2) 99 2,207,194 17.2% 2,207,194 16.9%
Medical facilities portfolio
Long-term acute care 16 209,031 1.6% 209,031 1.6%
Acute care 7 430,019 3.4% 432,285 3.3%
Inpatient rehab 6 143,122 1.1% 143,122 1.1%
Land 2 11,217 0.1% 11,217 0.1%
Other loans — 24,243 0.2% 24,243 0.2%
Subtotal hospitals 31 817,632 6.4% 819,898 6.3%
Medical office buldings 166 2,282,355 17.8% 2,394,847 18.4%
Life science buildings (3) 7 342,725 2.7% 342,725 2.6%
Medical facilities total 204 3,442,712 26.9% 3,557,470 27.3%
Total portfolio 868 $ 12,808,157 100.0% $ 13,027,463 100.0%
Bed / Unit Committed Per Bed / Unit
/ Square Foot Balance ($000) / Square Foot
Investment Metrics
Senior housing triple-net 23,626 units $ 3,678,470 $ 172,287
Skilled nursing 39,478 beds 3,584,329 90,793
Senior housing operating (2) 10,536 units 2,207,194 209,491
Hospital 1,857 beds 819,898 441,517
Medical office 9,555,262 sf 2,394,847 251
Life science (3) 342,725
Total $ 13,027,463
Notes:
(1) Includes HCN’s share of unconsolidated joint ventures.
(2) See Senior Housing Operating disclosure on page 24.
(3) See Life Science disclosure on page 30.
PORTFOLIO
19
PORTFOLIO 20
Portfolio Concentration
(dollars in thousands)
Total Investment% of
Properties Balance (1) Balances
By Relationship
Genesis HealthCare, LLC 148 $ 2,479,070 19.4%
Benchmark Senior Living, LLC 34 908,290 7.1%
Merrill Gardens, LLC 38 709,874 5.5%
Senior Living Communities, LLC 12 606,056 4.7%
Brandywine Senior Living, LLC 19 605,383 4.7%
Senior Star Living 10 460,577 3.6%
Brookdale Senior Living, Inc. 74 319,090 2.5%
Aurora Health Care, Inc. 18 297,404 2.3%
Capital Senior Living Corporation 24 296,847 2.3%
Silverado Senior Living, Inc. 19 260,755 2.0%
Remaining portfolio 472 5,864,811 45.9%
Total 868 12,808,157$ 100.0%
Senior Senior Medical
Housing Skilled Housing Office & Life Total Investment% of
Triple-net Nursing Operating Hospital Science (1) Properties Balance Total
Balances By State
Massachusetts $ 103,893 $ 372,065 $ 341,580 $ 11,217 $ 342,725 57 $ 1,171,480 9.1%
California 74,341—417,495 312,484 205,511 47 1,009,831 7.9%
New Jersey 310,727 453,355—35,478 163,602 46 963,162 7.5%
Florida 318,624 209,305 6,916—395,054 85 929,899 7.3%
Texas 220,938 168,456 114,890 191,449 207,645 77 903,378 7.1%
Pennsylvania 207,379 557,920—— 44 765,299 6.0%
Connecticut 128,831 100,794 372,255—- 37 601,880 4.7%
Washington 107,968—346,434—113,089 24 567,491 4.4%
Ohio 183,920 176,830 91,468 32,630 26,911 37 511,759 4.0%
Wisconsin 144,472—- 22,682 297,404 32 464,558 3.6%
Remaining portfolio 1,780,009 1,538,424 516,156 211,692 873,139 382 4,919,420 38.4%
Total 3,581,102$ $3,577,149 $2,207,194 $817,632 $2,625,080 868 12,808,157$ 100.0%
Senior Senior Medical
Housing Skilled Housing Office & Life Total% of
Triple-net Nursing Operating Hospital Science (1) Properties Total NOI (2) Total
NOI By State
Massachusetts $ 2,968 $ 10,037 $ 6,187 $—$ 7,372 57 $ 26,564 9.2%
California 2,275—8,801 7,397 3,880 47 22,353 7.8%
New Jersey 5,757 10,198—948 3,128 46 20,031 7.0%
Texas 5,008 4,906 2,257 3,543 3,860 77 19,574 6.8%
Florida 4,878 6,949 165—7,369 85 19,361 6.7%
Pennsylvania 4,233 13,676—794 360 44 19,063 6.6%
Connecticut 3,191 2,506 6,941—- 37 12,638 4.4%
Ohio 3,284 5,382 1,373 812 323 37 11,174 3.9%
Wisconsin 3,181—- 683 6,764 32 10,628 3.7%
West Virginia 1,029 8,809—— 24 9,838 3.4%
Remaining portfolio 47,905 34,111 13,091 5,053 16,064 382 116,224 40.5%
Total $ 83,709 $ 96,574 $ 38,815 $ 19,230 $ 49,120 868 $ 287,448 100.0%
Notes:
(1) Includes unconsolidated joint ventures. Balance and NOI for Massachusetts represent our Life Science portfolio only.
(2) Represents NOI including discontinued operations for the three months ended June 30, 2011, excluding other income totaling
$5,341,000.
Top Ten Relationship Descriptions
Genesis HealthCare, LLC, located in Kennett Square, PA, is a privately held company that operates 233 eldercare facilities, consisting of 208 skilled nursing/post-acute facilities and 25 assisted living facilities. Genesis has the ability to serve over 28,500 residents across 14 New England and Middle Atlantic states. Genesis also provides third-party rehabilitation services to nearly 900 healthcare providers. As of June 30, 2011, the HCN portfolio consisted of 148 facilities with 18,000 units in 11 states with an investment balance of $2.5 billion.
Benchmark Senior Living, LLC, located in Wellesley, MA, is a privately held company that operates 44 facilities with over 4,000 residents across the Northeast. The company currently operates independent living, assisted living, and dementia care facilities that focus on low to moderate acuity. As of June 30, 2011, the HCN portfolio consisted of 34 facilities with 3,007 units in six states with an investment balance of $908.3 million.
Merrill Gardens, LLC, located in Seattle, WA, is a privately held company that owns, operates and/or manages 46 independent and assisted living facilities with over 5,500 units in ten states. As of June 30, 2011, the HCN portfolio consisted of 38 facilities in eight states with an investment balance of $709.9 million.
Senior Living Communities, LLC, located in Charlotte, NC, is a private company that operates premier continuing care retirement communities (CCRCs) throughout the southeastern United States. The company operates 12 facilities in five states. As of June 30, 2011, the HCN portfolio consisted of 12 facilities in five states with an investment balance of $606.1 million.
Brandywine Senior Living, LLC, located in Mount Laurel, NJ, is a privately held company that operates 19 senior housing facilities with over 1,800 units in five states. As of June 30, 2011, the HCN portfolio consisted of 19 facilities in five states with an investment balance of $605.4 million.
Senior Star Living, located in Tulsa, OK, is a private operator of CCRCs and independent living, assisted living and dementia care facilities that operates 10 facilities in six states. As of June 30, 2011, the HCN portfolio consisted of 10 facilities in six states with an investment balance of $460.6 million.
Brookdale Senior Living, Inc. (NYSE:BKD), located in Chicago, IL, is a publicly traded company that provides independent living and assisted living services. The company operates 558 facilities in 34 states with the ability to serve approximately 51,000 residents. As of June 30, 2011, the HCN portfolio consisted of 74 facilities in 16 states with an investment balance of $319.1 million.
Aurora Health Care, Inc., located in Milwaukee, WI, is a non-profit operator of over 240 hospitals, pharmacies and clinics in eastern Wisconsin. Aurora is investment grade rated and is the largest health care system in the state. As of June 30, 2011, the HCN portfolio consisted of 18 facilities with an investment balance of $297.4 million.
Capital Senior Living Corporation, (NYSE:CSU) located in Dallas, TX, is a publicly traded company that owns, operates, develops and manages senior living communities throughout the United States. The Company operates 77 senior living communities in 23 states with an aggregate capacity of approximately 11,000 residents. As of June 30, 2011, the HCN portfolio consisted of 24 facilities in seven states with an investment balance of $296.8 million.
Silverado Senior Living, Inc., located in Irvine, CA, is a privately held company that operates 21 facilities with 1,044 units across five states. The company currently operates dementia care, skilled nursing, and assisted living facilities. As of June 30, 2011, the HCN portfolio consisted of 19 facilities in five states with an investment balance of $260.8 million.
PORTFOLIO
21
PORTFOLIO
22
Metropolitan Statistical Area Concentration (1)
(dollars in thousands) 19
Top 31 Top 75 Top 100
Senior housing triple-net $ 1,387,679 $ 2,060,482 $ 2,315,934
% of senior housing triple-net 38.8% 57.5% 64.7%
Skilled nursing 1,532,868 2,129,724 2,217,652
% of skilled nursing 42.9% 59.5% 62.0%
Senior housing operating 1,098,011 1,800,517 1,848,616
% of senior housing operating 49.7% 81.6% 83.8%
Hospital 421,862 696,740 732,007
% of hospital 51.6% 85.2% 89.5%
Medical office 1,350,033 1,805,014 1,957,821
% of medical office 59.2% 79.1% 85.8%
Life science (2) 342,725 342,725 342,725
% of life science 100.0% 100.0% 100.0%
Total portfolio $ 6,133,178 $ 8,835,202 $ 9,414,755
% of total portfolio 47.9% 69.0% 73.5%
Region Concentration
(dollars in thousands)
Total Investment% of
Properties Balance (2) Total
By Region (3)
South Atlantic 231 $ 2,628,740 20.5%
New England 117 2,228,193 17.4%
Middle Atlantic 102 1,932,203 15.1%
East North Central 111 1,618,993 12.6%
Pacific 74 1,610,711 12.6%
West South Central 97 1,032,823 8.1%
West North Central 32 645,819 5.0%
Mountain 45 574,286 4.5%
East South Central 59 536,389 4.2%
Total 868 $ 12,808,157 100.0%
Notes:
(1) Metropolitan statistical areas are as defined by the U.S. Census Bureau. Top 31, 75 and 100 classifications are reported per the
National Investment Center Market Area Profiles Subscription Service.
(2) Includes HCN’s share of unconsolidated joint ventures.
(3) Region definitions are derived from census bureau definitions and are itemized in the glossary.
20 Portfolio Performance
Facility Revenue Mix
Cash Flow
Age Occupancy Coverage (2) Private Pay Medicaid Medicare
Stable Portfolio (1)
Senior housing triple-net (3) 12 88.0% 1.47x 86.5% 9.4% 4.1%
Skilled nursing 24 85.3% 2.42x 19.5% 47.8% 32.7%
Senior housing operating 13 89.6% n/a 99.1% 0.0% 0.9%
Hospital 14 67.6% 2.71x 31.3% 6.2% 62.5%
Medical office 12 93.3% n/a 100.0% 0.0% 0.0%
Total 15 2.05x 80.1% 10.0% 9.9%
Notes:
(1) Data as of June 30, 2011 for medical office and senior housing operating and March 31, 2011for remaining asset types.
(2) Represents trailing twelve month coverage metrics.
(3) Excludes entrance fee portfolio.
Entrance Fee Portfolio
Investment
Average Balance Entrance Entrance Fee Rental Rental
Properties Age(millions) Fee Units Occupancy Units Occupancy
Entrance Fee Portfolio
Open Properties 13 6 $660.1 1,428 54% 1,046 88%
Same Store Cash NOI Growth
(dollars in thousands)
2Q10 Same Store 2Q11 Same Store
Properties (4) Cash NOI Cash NOI% Change
Same Store Portfolio
Senior housing triple-net (1) 174 $ 41,925 $ 43,623 4.1%
Skilled nursing triple-net (1) 163 33,302 34,040 2.2%
Senior housing operating (2) 98 34,158 38,471 12.6%
Hospitals (1) 22 10,579 10,834 2.4%
Medical office (3) 121 26,408 26,767 1.4%
Total 578 $ 146,372 $ 153,735 5.0%
Notes:
(1) Represents cash-only rent or interest income excluding the impact of lease or loan basis changes (e.g., rent-producing capital improvement additions for leases and principal draws or paydowns for loans).
(2) See page 24
(3) See page 28
(4) Represents those properties in the portfolio (both stable and unstable) for the 15 months preceding the end of the portfolio
performance period.
PORTFOLIO
23
PORTFOLIO
24
Portfolio Composition—Senior Housing Operating
(dollars in thousands; dollar amounts represent 100% of partnerships)
4Q10 1Q11 2Q11 3Q11 4Q11
Total Senior Housing Operating Performance
Properties 47 99 99
Average age (years) 15 12 13
Beds/Units 6,075 10,538 10,536
Investment balance $ 1,080,416 $ 2,240,442 $ 2,207,194
Total occupancy 85.7% 84.2% 86.3%
Total revenues $ 38,197 $ 71,286 $ 123,149
Operating expenses $ 24,628 $ 49,272 $ 84,334
NOI $ 13,569 $ 22,014 $ 38,815
Total cap-ex / TI / LC $ 2,131 $ 2,903 $ 4,066
2Q10 2Q11
Total Senior Housing Operating Same Store Performance (1)
Properties 98 98
Total revenues 116,650 124,768
Operating expenses 82,492 86,297
NOI 34,158 38,471
Weighted
Blended Average
Amount Interest Rate Maturity
Secured Debt (2)
Principal balance $ 1,099,137 5.3% 6.5
Properties Beds/Units% of Total
By State
California 25 2,791 26.5%
Washington 14 1,599 15.2%
Connecticut 14 1,381 13.1%
Massachusetts 13 1,055 10.0%
Texas 8 568 5.4%
Other 25 3,142 29.8%
Total 99 10,536 100.0%
Notes:
(1) Represents those properties in operation for 15 months preceding the end of the portfolio performance period. Amounts for
2Q10 represent the performance of operators that were not owned or operated by HCN.
(2) Non-recourse debt to HCN, secured by the joint ventures’ assets.
Same Store (148 properties)
Stable Portfolio Performance—Senior Housing Triple-Net
(excludes entrance fee portfolio)
Trailing Twelve Month Cash Flow Coverage
1.70 1.60 1.50 1.40 1.30
2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
1.54x
1.47x
basis 1Q11/ 1Q11/
points 1Q10 4Q10
Same Store -(1)
Stable(6)(5)
Occupancy
95% 90% 85% 80% 75%
2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
88.6%
88.0%
basis 1Q11/ 1Q11/
poits 1Q10 4Q10
Same Store(60) 10
Stable(120)(40)
Revenue per Occupied Unit
$4,700 $4,500 $4,300 $4,100 $3,900
$4,534
$4,437
2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
1Q11/ 1Q11/
(% chg) 1Q10 4Q10
Same Store 3.2% 0.6%
Stable 3.7% 2.6%
Expense per Occupied Unit
$3,000 $2,750 $2,500 $2,250 $2,000
2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
$2,914
$2,905
1Q11/ 1Q11/
(% chg) 1Q10 4Q10
Same Store 4.5% 1.8%
Stable 3.2% 2.7%
PORTFOLIO
25
PORTFOLIO
26
Same Store (166 properties)
Portfolio Performance—Skilled Nursing Stable
Trailing Twelve Month Cash Flow Coverage
2.5 2.4 2.3 2.2 2.1
2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
2.44x
2.42x
basis 1Q11/ 1Q11/
points 1Q10 4Q10
Same Store 8 4
Stable 8 4
Occupancy
90% 85% 80% 75% 70%
2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
85.3% 84.8%
basis 1Q11/ 1Q11/
points 1Q10 4Q10
Same Store(20) 40
Stable(10) 50
Revenue per Occupied Bed
$7,500 $7,250 $7,000 $6,750 $6,500
2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
$7,381 $7,364
1Q11/ 1Q11/
(% chg) 1Q10 4Q10
Same Store 7.3% 0.0%
Stable 6.6% -0.2%
Expense per Occupied Bed
$6,500 $6,000 $5,500 $5,000 $4,500
$5,920
$5,858
2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
1Q11/ 1Q11/
(% chg) 1Q10 4Q10
Same Store 6.2% 0.2%
Stable 5.5% 0.1%
Same Store(12 properties)
Stable Portfolio Performance—Hospitals
Trailing Twelve Month Cash Flow Coverage
3.0 2.8 2.6 2.4 2.2
2.71x
2.63x
2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
basis 1Q11/ 1Q11/
points 1Q10 4Q10
Same Store(16)(14)
Stable(13)(19)
Occupancy
75% 70% 65% 60% 55%
2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11
70.7%
67.6%
basis 1Q11/ 1Q11/
points 1Q10 4Q10
Same Store 495 413
Stable 439 202
PORTFOLIO
27
PORTFOLIO
28
Portfolio Composition—Medical Office Buildings
(dollars in thousands)
Investment Total Operating
Properties Square Feet Balance Revenues Expenses NOI Age Occupancy
Health system-affiliated 115 7,225,368 $ 1,826,238 $ 48,442 $ 13,059 $35,383 12 94.0%
Unaffiliated 36 1,198,536 317,884 8,257 2,764 5,493 16 89.0%
Subtotal 151 8,423,904 2,144,122 56,699 15,823 40,876 12 93.3%
Equity investment (1) 6 405,414 47,436 1,179 280 899
Discontinued operations—— 1,050 565 485
Development 3 603,023 61,228——
Loans 3 122,921 9,164 161—161
Land 3—20,405——
Total 166 9,555,262 $ 2,282,355 $ 59,089 $ 16,668 $42,421
Portfolio Performance—Medical Office Buildings
(dollars in thousands)
2Q10 3Q10 4Q10 1Q11 2Q11
Total MOB Performance
Properties* 123 124 142 145 151
Square feet* 6,403,531 6,521,731 7,756,147 8,070,387 8,423,904
Investment balance* $ 1,594,469 $ 1,619,393 $ 2,009,895 $ 2,096,836 $ 2,144,122
Occupancy* 93.0% 93.3% 93.3% 92.9% 93.3%
Total revenue* $ 40,932 $ 42,535 $ 43,314 $ 54,225 $ 56,699
Operating expenses* $ 11,970 $ 12,334 $ 12,085 $ 14,617 $ 15,823
NOI from continuing operations* $ 28,962 $ 30,201 $ 31,229 $ 39,608 $ 40,876
NOI from discontinued operations $ 538 $ 468 $ 525 $ 588 $ 485
Total cap-ex / TI / LC $ 5,060 $ 4,754 $ 5,997 $ 5,054 $ 4,858
Expired (square feet)* (2) 576,252 587,143 534,413 552,532 594,633
Retained (square feet)* (2) 457,286 488,694 451,147 433,627 496,728
Retention rate* (2) 79.4% 83.2% 84.4% 78.5% 83.5%
2Q10 3Q10 4Q10 1Q11 2Q11
Same Store Performance*
Properties 121 121 121 121 121
Square feet 6,265,391 6,265,391 6,265,391 6,265,391 6,265,391
Investment balance $ 1,566,681 $ 1,556,963 $ 1,549,534 $ 1,539,203 $ 1,524,610
Occupancy 93.0% 93.2% 93.5% 93.2% 93.5%
Cash revenue $ 37,875 $ 38,342 $ 38,659 $ 38,691 $ 38,345
Operating expenses $ 11,467 $ 11,616 $ 11,069 $ 11,401 $ 11,578
Cash NOI $ 26,408 $ 26,726 $ 27,590 $ 27,290 $ 26,767
2011 2012 2013 2014 2015
Remaining Lease Expirations*
Square feet 183,822 637,540 486,772 567,336 501,994
% of total portfolio 2.2% 7.6% 5.8% 6.7% 6.0%
* Results and forecasts include month-to-month and holdover leases and exclude mortgages, land, terminations and discontinued
operations.
Notes:
(1) Amounts reflected at HCN’s ownership interest in unconsolidated joint venture properties.
(2) Amounts represent trailing twelve months from the indicated quarter end.
Portfolio Concentration—Medical Office Buildings
Square Feet% of Total
By Tenant*
Aurora Health Care, Inc. 1,441,588 17.1%
Melbourne Internal Medicine Associates 352,839 4.2%
Tenet Health Systems 282,235 3.4%
Swedish Health Services 181,814 2.2%
Baptist Health System, Inc 161,933 1.9%
Remaining Portfolio 6,003,495 71.2%
Total 8,423,904 100.0%
*Excludes equity investments, development and loan properties.
Committed
Committed Balance per
Properties Square Feet% of Total Balance ($000s) Square Foot
By Region*
East North Central 26 1,851,173 19.4% $ 378,693 $ 205
South Atlantic 48 1,826,744 19.1% 520,127 285
Middle Atlantic 14 1,155,747 12.1% 308,718 267
Pacific 15 1,081,138 11.3% 344,696 319
West North Central 15 1,001,453 10.5% 247,725 247
Mountain 17 956,044 10.0% 233,861 245
West South Central 17 942,491 9.9% 218,796 232
East South Central 14 740,472 7.7% 142,231 192
Total 166 9,555,262 100.0% $ 2,394,847 $ 251
*Region definitions are derived from U.S. Census Bureau definitions and are itemized in the glossary.
Committed
Committed Balance per
Properties Square Feet% of Total Balance ($000s) Square Foot
By State
Wisconsin 18 1,441,588 15.1% $ 297,404 $ 206
Florida 30 1,256,598 13.2% 395,054 314
Texas 16 897,688 9.4% 207,645 231
New Jersey 7 879,359 9.2% 253,390 288
California 10 687,130 7.2% 205,511 299
Tennessee 8 408,107 4.3% 100,757 247
Arizona 5 338,529 3.5% 91,096 269
Washington 4 330,844 3.5% 113,089 342
Nevada 9 324,992 3.4% 104,919 323
Alabama 5 304,050 3.2% 39,251 129
Remaining portfolio 54 2,686,377 28.0% 586,731 218
Total 166 9,555,262 100.0% $ 2,394,847 $ 251
PORTFOLIO
29
PORTFOLIO
30
Portfolio Composition—Life Science Buildings
(dollars in thousands; dollar amounts represent HCN’s 49% ownership interest)
2Q10 3Q10 4Q10 1Q11 2Q11
Total Life Science Performance
Properties 7 7 7 7 7
Average age (years) 12 12 12 12 13
Square feet 1,188,132 1,188,132 1,118,132 1,188,132 1,188,132
Investment balance $ 352,385 $ 349,832 $ 346,562 $ 344,413 $ 342,725
Occupancy 100.0% 100.0% 100.0% 100.0% 100.0%
Total revenues (1) $ 9,355 $ 10,401 $ 10,521 $ 11,270 $ 10,584
Operating expenses $ 2,716 $ 3,035 $ 2,855 $ 3,601 $ 3,212
NOI $ 6,639 $ 7,366 $ 7,666 $ 7,669 $ 7,372
Total cap-ex / TI / LC $—$—$—$—$ -
Weighted
Blended Average
Amount Interest Rate Maturity
Secured Debt (2)
Principal balance $ 164,549 6.3% 3.6
Square Feet% of Total
By Tenant
Millennium (Takeda) 628,934 52.9%
Alkermes 210,248 17.7%
Brigham & Women’s Hospital 125,096 10.5%
Ariad Pharmaceuticals 100,361 8.4%
Novartis 70,475 5.9%
Genzyme 52,518 4.4%
Other Tenants 500 0.2%
Total (3) 1,188,132 100.0%
Notes:
(1) Include amortization of below market rents and straight-line rent of $1,041,000 for the three months ended June 30, 2011.
(2) Non-recourse debt to HCN, secured by the joint venture’s assets.
(3) Excludes two parking garages consisting of 1,709 spaces included in the Forest City Enterprises joint venture.
Development Activity
(dollars in thousands)
Beds / Units / CIP Balance 2011 YTD 2011 YTD CIP Balance
Projects Square Feet at 12/31/10 Funding Conversions at 6/30/2011
Development Properties
Combination—rental 10 1,124 $ 38,206 $ 55,685 $—$ 93,891
Freestanding dementia care 1 42—4,647—4,647
Hospital 3 202 208,882 39,675(219,623) 28,934
Medical office 6 917,261 85,512 81,656(105,940) 61,228
Sub-total 20 $ 332,600 $ 181,663 $(325,563) $ 188,700
Expansion Projects
CCRC—entrance fee 5 75 $ 5,762 $ 5,063 $(3,278) $ 7,547
Combination—entrance fee 6 135 11,693 10,604(6,383) 15,914
Hospital 1 31 6,738 2,819(9,557) -
Sub-total 12 24,193 18,486(19,218) 23,461
Total 32 $ 356,793 $ 200,149 $(344,781) $ 212,161
Development Funding Projections *
(dollars in thousands)
Projected Future Funding
Beds / Units
/ Square Initial 2011 2012 Funding Unfunded Committed
Projects Feet Yield Funding Funding Thereafter Commitments Balances
Development Properties
Combination—rental 10 1,124 8.6% $ 67,930 $ 19,701 $—$ 87,631 $ 181,522
Freestanding dementia care 1 42 9.0% 3,178—- 3,178 7,825
Hospital 1 46 11.0% 2,266—- 2,266 31,200
Medical office 3 603,021 8.6% 35,893 76,600—112,492 173,720
Total 15 $109,267 $ 96,301 $—$ 205,567 $ 394,267
Development Project Conversion Estimates*
(dollars in thousands)
Quarterly Conversions Annual Conversions
Projected Initial Projected Initial
Amount Cash Yields (1) Amount Cash Yields (1)
1Q11 actual $ 105,940 8.8% 2011 estimate $ 475,140 9.1%
2Q11 actual 219,625 9.3% 2012 estimate 244,690 8.6%
3Q11 estimate 80,775 9.6% 2013 estimate—0.0%
4Q11 estimate 68,800 8.5% 2014 estimate—0.0%
1Q12 estimate 24,350 9.0% 2015+ estimate—0.0%
2Q12 estimate 122,607 8.3% Total $ 719,830
3Q12 estimate -
4Q12 estimate 97,733 8.8%
Total $ 719,830
Notes:
* Excludes expansion projects
(1) Actual initial yields may be higher if the underlying market rates increase. MOBs represent stabilized yields.
PORTFOLIO
31
PORTFOLIO
32
Unstabilized Properties
(dollars in thousands)
Acquisitions/
3/31/2011 Construction Expansions/ 6/30/2011
Properties Stabilized Conversions Reclassifications Properties
Property Type
CCRC—entrance fee 3 0 0 0 3
CCRC—rental 2 0 0 0 2
Combination—entrance fee 7 0 0 0 7
Combination—rental 18(3) 0 1 16
Freestanding assisted living 1 0 0 0 1
Freestanding dementia care 1 0 0 0 1
Freestanding skilled nursing 2(2) 0 0 0
Long term acute care hospital 1(1) 0 0 0
Acute care hospital 1 0 1 0 2
Inpatient rehab facility 0 0 1 0 1
Total 36(6) 2 1 33
6/30/2011 Investment% of Total
Properties Beds / Units Balance Investment
Property Type
CCRC—entrance fee 3 654 $ 205,058 1.6%
CCRC—rental 2 634 151,296 1.2%
Combination—entrance fee 7 1,194 324,385 2.5%
Combination—rental 16 2,077 318,902 2.5%
Freestanding assisted living 1 101 15,316 0.1%
Freestanding dementia care 1 56 10,041 0.1%
Acute care hospital 2 197 315,961 2.5%
Inpatient rehab facility 1 50 14,026 0.1%
Total 33 4,963 $ 1,354,985 10.6%
3/31/2011 Construction Acquisitions/ Progressions/ 6/30/2011
Properties Stabilized Conversions Expansions Reclassification Properties
Occupancy
0—50% 11(1) 2(1)(2) 9
50%—70% 16(4) 0 2 1 15
70% + 9(1) 0 0 1 9
Total 36(6) 2 1 0 33
6/30/2011 Months In% of Total Investment% of Total
Properties Operation Revenues Revenues (1) Balance Investment
Occupancy
0—50% 9 16 $ 50,523 5.4% $ 633,022 5.0%
50%—70% 15 22 37,816 4.0% 499,050 3.9%
70% + 9 24 37,816 4.0% 222,913 1.7%
Total 33 21 $ 126,155 13.4% $ 1,354,985 10.6%
Notes:
(1) Includes annualized revenues as presented on page 13.
Portfolio Trends
Relationship Concentration Trend (1)
100% 80% 60% 40% 20% 0%
4Q08 4Q09 4Q10 2Q11
54.1% Top 10
41.4% Top 5
Property Type Trend (2)
50% 40% 30% 20% 10% 0%
4Q08 4Q09 4Q10 2Q11
28.3% 27.5% 18.4% 16.9% 6.3% 2.6%
SH-NNN SNF MOB SH-O
HOS LSB
Payor Mix Trend (3)
100% 80% 60% 40% 20% 0%
80.1%
10.0% 9.9%
Private Medicaid Medicare
Notes:
(1) Relationship concentration trend based on investment balances for the dates presented. (2) Property type trend based on committed investment balances for the dates presented.
(3) Payor mix is weighted by investment balance including stable and unstabilized properties but excluding properties under construction.
PORTFOLIO
33
GLOSSARY
34
Age: Current year, less the year built, adjusted for major renovations.
Assisted Living: Assisted living facilities are state regulated rental properties that provide the same services as independent living facilities, but also provide supportive care from trained employees to residents who require assistance with activities of daily living, including management of medications, bathing, dressing, toileting, ambulating and eating.
Cap-ex, Tenant Improvements, Leasing Commissions: Represents amounts paid in cash for: 1) recurring and non-recurring capital expenditures required to maintain and re-tenant our properties, 2) second generation tenant improvements and 3) leasing commissions paid to third party leasing agents to secure new tenants.
Cash Flow Coverage: Represents the ratio of EBITDARM to contractual rent for leases or interest and principal payments for loans. CFC is a measure of a property’s ability to generate sufficient cash flows for the operator/borrower to pay rent and meet other obligations, assuming that management fees are not paid. The coverage shown excludes properties that are unstabilized, closed or for which data is not available or meaningful.
CCRC: Continuing care retirement communities are campuses with both independent living and skilled nursing, but often include detached homes and/or assisted living as well. Resident payment plans vary, but can include entrance fees, condominium fees and rental fees. Many of these communities also charge monthly maintenance fees in exchange for a living unit, meals and some health services.
Combination: A property that offers two or more levels of care (i.e. independent living, assisted living, dementia and skilled nursing), but does not meet the definition of a CCRC.
Committed Balance: Represents investment balance plus unfunded construction commitments for which initial funding has commenced.
Construction Conversion: Represents completed construction projects that were placed into service and began earning rent.
Dementia Care: Certain assisted living facilities may include state licensed settings that specialize in caring for those afflicted with Alzheimer’s disease and/or similar forms of dementia.
EBITDARM: Earnings before interest, taxes, depreciation, amortization, rent and management fees. The company uses unaudited, periodic financial information provided solely by tenants/borrowers to calculate EBITDARM and has not independently verified the information. EBITDARM is used to calculate CFC.
Entrance Fee: A property where the resident pays a substantial upfront fee and an ongoing monthly service fee for the right to occupy a unit. Typically, a portion of the upfront fee is refundable.
Expense per Occupied Unit: Represents the ratio of revenue less EBITDARM to occupied units based on the most recent quarter of available data and excludes properties that are unstabilized, closed, or for which data is not available or meaningful. The company uses unaudited, periodic financial information provided solely by tenants/borrowers to calculate expense per occupied unit and has not independently verified the information.
Freestanding: A property that offers one level of service.
Health System-Affiliated: Properties are considered affiliated with a health system if one or more of the following conditions are met: 1) the land parcel is contained within the physical boundaries of a hospital campus; 2) the land parcel is located adjacent to the campus; 3) the building is physically connected to the hospital regardless of the land ownership structure; 4) a ground lease is maintained with a health system entity; 5) a master lease is maintained with a health system entity; 6) significant square footage is leased to a health system entity; 7) the property includes an ambulatory surgery center with a hospital partnership interest; or (8) a significant square footage is leased to a physician group that is either employed, directly or indirectly by a health system, or has a significant clinical and financial affiliation with the health system.
Hospitals: Hospitals generally include acute care hospitals, inpatient rehabilitation hospitals and long-term acute care hospitals. Acute care hospitals provide a wide range of inpatient and outpatient services, including, but not limited to, surgery, rehabilitation, therapy and clinical laboratories. Long-term acute care hospitals provide inpatient services for patients with complex medical conditions who require more intensive care, monitoring or emergency support than that available in most skilled nursing facilities.
Independent Living: Independent living facilities are age-restricted multi-family properties with central dining facilities that provide residents access to28 meals and other services such as housekeeping, linen service, transportation and social and recreational activities.
Initial Cash Yield: Represents annualized contractual or projected income to be received in cash at date of investment divided by investment amount.
Investment Amount:
Acquisitions – Represents purchase price excluding accounting adjustments pursuant to U.S. GAAP. New loans – Represents face amount of new loan.
Construction conversion – Represents book balance converted from CIP to real property upon completion. Capital improvements to existing properties – Represents cash funded to tenants under an existing lease. Loan advances – Represents cash funded to operators under an existing loan agreement.
Investment Balance: Represents net book value of real estate investments or the company’s interest in unconsolidated joint ventures as reflected on the company’s balance sheet.
Life Science: Life science buildings are laboratory and office facilities, often located near universities, specifically constructed and designed for use by biotechnology and pharmaceutical companies.
Medical Office: Medical office buildings are office and clinic facilities, often located near hospitals or on hospital campuses, specifically constructed and designed for use by physicians and other health care personnel to provide services to their patients. They may also include ambulatory surgery centers that are used for general or specialty surgical procedures not requiring an overnight stay in a hospital. Medical office buildings typically contain sole and group physician practices and may provide laboratory and other patient services.
Metropolitan Statistical Area: Metropolitan statistical areas are geographic entities defined by the U.S. Office of Management and Budget (OMB) for use by Federal statistical agencies in collecting, tabulating and publishing Federal statistics. The NIC MAP™ Data and Analysis Service provides revenue, supply and demographic information for the IL/CCRC, assisted living, and skilled nursing service types and commonly aggregates the information for the top 31, top 75 and top 100 MSAs. The company provides investment balance information in the same categories as another measure of geographic concentration.
Occupancy: Medical office occupancy represents the percentage of total rentable square feet leased and occupied, including month-to-month leases, as of the date reported. Occupancy for all other property types represents average quarterly operating occupancy based on the most recent quarter of available data and excludes properties that are unstabilized, closed or for which data is not available or meaningful. The company uses unaudited, periodic financial information provided solely by tenants/borrowers to calculate occupancy and has not independently verified the information.
Region Definitions: Eight divisions as established by the Census Bureau.
New England – Connecticut , Maine , Massachusetts, New Hampshire, Rhode Island, Vermont. Middle Atlantic – New Jersey, New York, Pennsylvania.
East North Central – Indiana, Illinois, Michigan, Ohio, Wisconsin.
West North Central – Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota.
South Atlantic – Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, West Virginia.
East South Central – Alabama, Kentucky, Mississippi, Tennessee. West South Central – Arkansas, Louisiana, Oklahoma, Texas.
Mountain – Arizona, Colorado, Idaho, New Mexico, Montana, Utah, Nevada, Wyoming. Pacific – Alaska, California, Hawaii, Oregon, Washington.
GLOSSARY
35
GLOSSARY
36
Renewal Rate: The ratio of total square feet expiring and available for lease to total renewed square feet.
Renewed Square Feet: Square feet expiring during the reporting period upon which a lease is executed by the current occupant.
Rental: A property where the resident pays a monthly market rate for the level of care provided, but is not required to pay a substantial upfront fee.
Revenue per Occupied Unit: Represents the ratio of total revenue to occupied units based on the most recent quarter of available data and excludes properties that are unstabilized, closed, or for which data is not available or meaningful. The company uses unaudited, periodic financial information provided solely by tenants/borrowers to calculate revenue per occupied unit and has not independently verified the information.
Same Store: For the medical office building portfolio, same store is defined as those properties owned for the entire previous five quarters. Properties acquired, developed or classified in discontinued operations are excluded from the same store amounts. For all other property types, same store is defined as those properties in the stable portfolio for the 24 months preceding the end of the portfolio performance reporting period, unless otherwise noted. Excludes senior housing operating portfolio.
Senior Housing Operating: Includes independent and assisted living properties held in consolidated joint ventures, structured to take advantage of the REIT Investment Diversification and Empowerment Act of 2007.
Senior Housing Triple-net: Includes independent and assisted living properties subject to triple-net operating leases and real estate loans receivable.
Skilled Nursing: Skilled nursing facilities are licensed daily rate or rental properties where the majority of individuals require 24-hour nursing and/or medical care. Generally, these properties are licensed for Medicaid and/or Medicare reimbursement and are subject to triple-net operating leases.
Square Feet: Net rentable square feet calculated utilizing Building Owners and Managers Association measurement standards.
Stable: Generally, a property is considered stable (versus unstabilized or under development) when it has achieved lease up or, if targeted performance has not been achieved, 12 months following the budgeted stabilization date. Entrance fee communities are considered stable after achieving aggregate property occupancy of 80% or more.
Unstabilized: An acquisition that does not meet the stable criteria upon closing or a construction property that has opened but not yet reached stabilization.
Yield on Sale: Represents annualized contractual income that was being received in cash at date of disposition divided by disposition cash proceeds.
The company believes that net income attributable to common stockholders (NICS), as defined by U.S. generally accepted accounting principles (U.S. GAAP), is the most appropriate earnings measurement. However, the company considers funds from operations (FFO) and funds available for distribution (FAD) to be useful supplemental measures of its operating performance. Historical cost accounting for real estate assets in accordance with U.S. GAAP implicitly assumes that the value of real estate assets diminishes predictably over time as evidenced by the provision for depreciation. However, since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient. In response, the National Association of Real Estate Investment Trusts (NAREIT) created FFO as a supplemental measure of operating performance for REITs that excludes historical cost depreciation from net income. FFO, as defined by NAREIT, means net income, computed in accordance with U.S. GAAP, excluding gains (or losses) from sales of real estate, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Normalized FFO represents FFO adjusted for certain items detailed on page 13. FAD represents FFO excluding net straight-line rental adjustments, amortization related to above/below market leases and amortization of non-cash interest expenses and less cash used to fund capital expenditures, tenant improvements and lease commissions at medical office buildings. Normalized FAD represents FAD excluding prepaid/straight-line rent cash receipts and adjusted for certain items detailed on page 13. The company believes that normalized FFO and normalized FAD are useful supplemental measures of operating performance because investors and equity analysts may use these measures to compare the operating performance of the company between periods or as compared to other REITs or other companies on a consistent basis without having to account for differences caused by unanticipated and/or incalculable items.
EBITDA stands for earnings before interest, taxes, depreciation and amortization. A covenant in our line of credit arrangement contains a financial ratio based on a definition of EBITDA that is specific to that agreement. Failure to satisfy this covenant could result in an event of default that could have a material adverse impact on our cost and availability of capital, which could in turn have a material adverse impact on our consolidated results of operations, liquidity and/or financial condition. Due to the materiality of this debt agreement and the financial covenant, we have disclosed Adjusted EBITDA, which represents EBITDA as defined above and adjusted for stock-based compensation expense, provision for loan losses and gain/loss on extinguishment of debt. We use Adjusted EBITDA to measure our adjusted fixed charge coverage ratio, which represents Adjusted EBITDA divided by fixed charges on a trailing twelve months basis. Fixed charges include total interest (excluding capitalized interest and non-cash interest expenses), secured debt principal amortization and preferred dividends. Effecitve July 27, 2011, our covenant requires an adjusted fixed charge ratio of at least 1.50 times.
Net operating income (NOI) is used to evaluate the operating performance of the company’s properties. The company defines NOI as total revenues, including tenant reimbursements and discontinued operations, less property operating expenses, which exclude depreciation and amortization, general and administrative expenses, impairments and interest expense. The company believes NOI provides investors relevant and useful information because it measures the operating performance of the company’s properties at the property level on an unleveraged basis. The company uses NOI to make decisions about resource allocations and to assess the property level performance of our properties.
Other than Adjusted EBITDA, the company’s supplemental reporting measures and similarly entitled financial measures are widely used by investors, equity and debt analysts and rating agencies in the valuation, comparison, rating and investment recommendations of companies. The company’s management uses these financial measures to facilitate internal and external comparisons to historical operating results and in making operating decisions. Additionally, these measures are utilized by the Board of Directors to evaluate management. Adjusted EBITDA is used solely to determine our compliance with a financial covenant of our line of credit arrangement and is not being presented for use by investors for any other purpose. The supplemental reporting measures do not represent net income or cash flow provided from
operating activities as determined in accordance with U.S. GAAP and should not be considered as alternative measures of profitability or liquidity. Finally, the supplemental reporting measures, as defined by the company, may not be comparable to similarly entitled items reported by other real estate investment trusts or other companies. Multi-period amounts may not equal the sum of the individual quarterly amounts due to rounding.
SUPPLEMENTAL REPORTING MEASURES
37
HEALTH CARE REIT, INC. 4500 Dorr Street Toledo, OH 43615-4040 419.247.2800 main 419.247.2826 fax www.hcreit.com